Confident Consumers Trigger Retail Sales Growth

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Research Brief

February 2017

RETAIL SALES

Developing Trends

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As e-commerce has grown to represent 12 percent of retail sales, the two largest retailers are pursuing different strategies to drive revenue growth. Wal-Mart recently acquired Moosejaw, which follows the 2016 purchase of Jets.com, in order to drive more traffic to its web portals. Meanwhile, Amazon is expanding third-party offerings on its platform. A recent announcement highlighted a 50 percent increase in third-party sales over the holidays. Significant growth in e-commerce is driving demand for industrial spaces, prompting a 50-basis-point decline in vacancy to 5.7 percent in 2016.

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Sales surged 8.5 percent at health and personal care stores over the past year. Boosted by a deal with Target to acquire its in-store pharmacies, CVS added 1,900 locations in 2016.

Consumers followed up robust holiday spending with equally impressive activity in January as core retail sales vaulted 4.4 percent over the past year. Consumer confidence remains near the highest levels of the past decade, reflecting heightened expectations for economic conditions and sentiment. This positive outlook, together with steady job growth and wage gains, has boosted consumption.

Rising inflation, driven by strong gains in oil prices, pushed CPI up 2.5 percent over the past year. The ascending inflation bolsters the case for the Federal Reserve to move towards normalizing interest rates over the coming year. After meeting in December, the Federal Reserve announced its intention to hike interest rates three times in 2017.

4.4%

Core Retail Sales
Y-O-Y*

2.5%

Inflation/CPI
Y-O-Y*

* Through January Sources: Marcus & Millichap Research Services; U.S. Census Bureau; National Retail Federation; University of Michigan Consumer Confidence Index

The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.